KBRA assigns issuer and senior unsecured debt ratings of A- to Takeoff Merger Sub Inc. (“Merger Sub”), an entity which will merge with Air Lease Corporation (NYSE: AL or “Air Lease”, a global aircraft leasing company based in Los Angeles, California) and be renamed Sumisho Air Lease Corporation (“SALC” or the company). The rating Outlook is Stable.

KBRA expects to assign an A- rating to the senior unsecured notes expected to be issued by Merger Sub. Upon close of the AL acquisition and release of proceeds from escrow, proceeds from notes will be used (i) to pay a portion of the Air Lease acquisition consideration and related fees and expenses; (ii) to repay certain existing indebtedness; and (iii) for general corporate purposes.

In addition, KBRA assigns issuer and senior unsecured debt ratings of A- to Sumisho Air Lease Finance Corporation (“SALFC”, the 100% owner of Merger Sub) as well as a rating of A- to the $1.0 billion senior unsecured term loan and $3.5 billion senior unsecured revolving credit facility issued by SALFC and guaranteed by Merger Sub. The rating Outlook is Stable.

In September 2025, Sumitomo Corporation ("SC"), SMBC Aviation Capital ("SMBC AC"), Apollo and Brookfield reached a definitive agreement to acquire AL for approximately $7.4 billion in cash through newly established entities, Sumisho Air Lease Corporation DAC (“Parent”) and Merger Sub, an indirect wholly owned subsidiary of Parent, pursuant to which, Merger Sub will merge with Air Lease and be renamed Sumisho Air Lease Corporation. The transaction is expected to close in the first half of 2026, subject to customary closing conditions and required regulatory approvals.

Key Credit Considerations

The ratings reflects KBRA’s view of SALC as strategically important to its majority owners, SMBC AC (a leading global aircraft lessor that will act as servicer for the majority of SALC’s fleet) and SC (a Japanese conglomerate operating across several sectors), which have strong credit profiles, deep aviation investment expertise and have demonstrated long-term commitment to the sector historically, in addition to SALC’s post-acquisition standalone credit profile.

In KBRA’s view, there is a high likelihood of parental support for SALC given (i) the company’s strategic importance to the majority owners as it broadens SMBC AC’s global footprint with a high quality fleet and diverse customer base and enhances SC’s exposure in its key leasing sector (ii) operational integration with day-to-day management by SMBC AC as servicer (iii) the company’s core business overlap with SMBC AC (iv) shared management and leadership (v) funding support from the majority owners including debt and equity capital and (vi) shared branding with other SC subsidiaries.

In KBRA’s view, the majority owners have strong abilities to support SALC with their strong financial positions, substantial liquidity, and robust funding access. SMBC AC is majority (66%) beneficially owned by Sumitomo Mitsui Financial Group, Inc. (NYSE: SMFG, senior debt rated A /Stable Outlook by KBRA), through its bank subsidiary, Sumitomo Mitsui Banking Corporation (“SMBC”; senior debt rated A+ / Stable Outlook by KBRA) and 34% owned by SC. SMFG is one of the three largest financial institutions in Japan.

The ratings are also supported by a strong standalone credit profile of SALC which is expected to benefit from key strengths of AL (senior debt rated A-/ Stable Outlook by KBRA) including an in-demand quality fleet focused on new-technology aircraft, contracted lease revenue with a diverse customer base and a largely unsecured funding profile with significant unencumbered assets. In addition, SALC benefits from SMBC AC’s experienced management team, strong risk management and corporate governance and extensive aviation platform and industry relationships. KBRA notes that, without an orderbook, SALC’s future growth is less certain but KBRA expects the company to maintain a sizeable and quality fleet.

SALC’s liquidity profile is supported by a $3.5 billion unsecured RCF and unrestricted cash. Available liquidity is expected to adequately cover near-term debt obligations when considering the strong operating cash flow of the AL portfolio and no committed capex post-acquisition. SALC will have multiple channels through which it can access liquidity, including both USD and non-USD unsecured bonds, an unsecured revolver, term loans, secured financings, and preferred equity issuances, in additional to debt funding support from SMBC.

On a Debt-to-tangible common equity (TCE) basis, leverage will be 3.5x pro-forma for transaction close (giving 50% equity credit to outstanding preferred shares) and is projected to decline to the company’s long-term target of 3.0x in the near-term with proceeds from planned aircraft sales used to repay debt. The company is expected to maintain strong financial metrics in order to ensure ongoing funding access at attractive rates.

The ratings are balanced by less certain long-term growth and fleet metrics of SALC without an orderbook, transaction execution risk including planned aircraft sales, the cyclical nature of the industry that could lead to credit issues with airline customers, and event risks related to air travel.

The alignment of the senior unsecured debt ratings with the issuer rating reflects the almost entirely unencumbered asset base providing strong coverage of unsecured debt of 1.5x on a pro-forma basis.

The Stable Outlook reflects an acceptable leverage target and strong funding and liquidity profiles as well as AL’s and SMBC AC's resilient performance through market disruptions historically, with proven access to funding at attractive rates. The Stable Outlook also considers the current favorable industry dynamics for aircraft lessors with robust aircraft demand and limited supply driving higher lease rates and aircraft values, which are expected to remain for several years.

Rating Sensitivities

A rating upgrade in the near future is not expected given the industry’s cyclical nature and exposure to event risk that could lead to credit issues with airline customers, as well as the company’s reliance on wholesale funding, despite the resilience demonstrated by AL and SMBC AC during recent market disruptions.

The Stable Outlook could be revised to Negative or the ratings could be downgraded if air traffic declines and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics. A significant increase in the company’s asset encumbrance could also trigger a review for downgrade. A significant decline in the company’s strategic importance to the majority owners, in KBRA’s view, combined with a significant decline in fleet quality metrics or customer diversity could lead to a review for downgrade.

To access ratings and relevant documents, click here.

Methodologies

• Financial Institutions: Finance Company Global Rating Methodology
• Corporates & Financial Institutions: Corporate Instruments / Corporate-Linked Obligations Notching Global Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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